Tech Frets Over Dems Continued Commitment

By Roy Mark |
Posted 2007-09-04

As Congress reconvenes this week, theres guarded optimism in Washington technology policy shops that the 8-month-old Democratic body will continue to champion a pro-tech agenda. For the first time in six years, the tech wish list actually finds itself on offense instead of defense.

Fresh off authorizing a 10-year investment of $33.6 billion in critical competitiveness areas, with patent reform on the fast track and little opposition to extending an expiring ban on Internet connection taxes, lawmakers seem to be thinking of technology this year as a priorityrather than an afterthoughton a crowded federal agenda.

The lingering question, though, is whether its just feel-good legislation or a more serious commitment by Democrats, aided by a healthy dose of Republicans, to change the direction of national technology policy.

Looming over it all is next years national election, narrowing even more the window of opportunity for constructive legislative gains before the presidential campaign saps the momentum of the 110th Congress.

For example, authorizing investments is an easy business, an abstract nod to the deep pockets of Silicon Valley. Appropriating those funds for next year and the next nine years is a much trickier and riskier enterprise. That bruising battle is still to come when the budget committees begin to hammer out just how much of the authorizations in Public Law 110-69, the America Competes Act, will actually be spent.

"If they dont follow up with the money, its just talk," said Tom Galvin, a partner at Washingtons 463 Communications, which counts among its clients Sun Microsystems, Cisco Systems and Technet, the politically savvy CEO network. "Theres going to be a push for Congress to put its money where its mouth is."

Patent reform faces a similarly shaky future. Although the judiciary committees of both the House and Senate have approved bills that the tech industry strongly favors, there are still serious questions about how the legislation will play with the broader membership, particularly those with strong ties and constituencies in the pharmaceutical and manufacturing industries.

Even in those channels, there is an admission that the system needs reforming. But, they argue, Sen. Patrick Leahy, D-Vt., and Rep. Howard Berman, D-Calif., the shepherds of the Democrats patent reform push, are going too far.

"We are very concerned that the bill in its present form picks winners and losers among industries with different business models in a way that has never before been attempted in patent law or practice," House Republican Leader John Boehner and his whip, Rep. Roy Blunt, wrote in a letter to Speaker Nancy Pelosi Aug. 30.

The Patent Reform Act of 2007 seeks the first significant changes in U.S. patent law in several decades. The bills provisions include narrowing the definition of willful infringement, which brings treble damages, and to limit infringement damages to the actual value of the technology involved. Currently, juries calculate damages based on the overall value of the finished product.

Although later tossed by a federal judge, Microsoft, of Redmond, Wash., in February was ordered by a San Diego jury to pony up $1.52 billion, a record U.S. infringement damage award, for infringing on Alcatel-Lucent MP3 patents. The judgment was based on worldwide sales of PCs and laptops with the Windows operating system.

The bill also seeks to limit bad and questionable patents at the source, creating a "second window" to challenge or squash patents newly issued by the U.S. Patent and Trademark Office. Further, the legislation would create a first-inventor-to-file system to replace the current first-to-invent standard, moving the United States closer to international patent standards.

"Rather than scheduling this bill for quick consideration by the House, we are asking you to work with the sponsors in urging them to continue to find consensus so that all U.S. companies benefit from reforming the patent system rather than advancing one business model over another," Boehner and Blunt wrote in their letter to Pelosi. "If that course is pursued, we stand ready to work with you in a bipartisan manner."

Pelosi promptly scheduled a floor vote on the bill, tentatively set for Sept. 7. When, and if, the Senate votes on the bill is not certain.

"The common view is not what will happen in the House, but what will happen in the Senate," said Roger Cochetti, group director of U.S. public policy at CompTIA (Computing Technology Industry Association), one of the numerous Washington-based trade groups representing IT interests. "The showdown will be in the Senate."

Cochetti said there is a "lot of momentum" for patent reform in Congress, while 463s Galvin is more circumspect. "There are still a lot of divisions within various industries," Galvin said. "I dont see it happening without a major breakthrough compromise. Otherwise, theyre just playing kick the can."

If the House approves a tech-driven patent reform bill and the Senate takes a pass, it wouldnt be the first time the upper chamber ignored the Houses tech policy ideas. Four years ago, the House voted to make a temporary ban on Internet connection taxes permanent and to strip away a grandfather clause that exempted nine states from the ban. The temporary ban had been in place since 1998.

The Senate dismissed the notion, agreeing only to extend the bangrandfather clause intactfor another three years. In November, that ban expires. Several bills are already in place to extend the moratorium. As has been the case since 1998, the bills call for a permanent ban on access taxes, a step Congress has never taken and is not likely to do this fall.

"A few years ago, the debate was about whether there should be [a ban] at all. Now its mostly about whether to make it permanent or not," Cochetti said.

Expiring temporary tax bans are nothing new in Washington. The research-and-development tax credit is also set to expire at the end of this year. If it expires, it will be the 13th time in the 25-year history of the credit that Congress allowed it to lapse before eventually renewing it. Like the Internet access tax, calls for making the R&D tax credit permanent have failed.

Coloring it all will be the rapidly approaching presidential campaigns. "By the end of the fall, [Congress] will be in full-fledged campaign mode," Galvin said.

If so, lawmakers will be hard pressed to keep the tech agenda on track.

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